Pros and Cons of Leasing a Car in Ontario
Friday, February 3, 2017
Last week’s blog post introduced the topic of leasing a new car in Ontario, laid out the different types of leases in the marketplace and defined five leasing terms you should know.
As that post stated, a lease is a contract to “rent” a vehicle for a long period of time. Should your situation change due to relocation, job loss or discovering the vehicle no longer meets your needs (e.g. starting a family) it may be difficult and expensive to get out of a lease. But there are also upsides to leasing. Like most things in life, there are pros and cons. Let’s examine some of them…search and determine if leasing is right for you, before you sign the contract.
|Value: At the end of a lease, the buyout value of the vehicle may be higher than similar vehicles available.
A higher end value may mean smaller monthly lease payments.
|Cost: Consumers have the option to buy the vehicle at lease end, but paying out the remaining value of the car may cost you more than purchasing a similar used vehicle
|Choice: When a lease term is finished, consumers can return or buy the vehicle, or sign a lease for a different vehicle.
||Extra Charges: The vehicle must be returned in a reasonable condition or else additional charges may be added for excess wear and tear. Consumers may be able to purchase additional insurance packages to cover future wear and tear.
Warranty: If leasing a newer model vehicle, it may come with added benefits such as manufacturer's extended warranty, roadside assistance, etc.
|Less Flexibility: If you are leasing, you do not own the car. You've made a promise to pay monthly payments over a specific period of time. These terms will be difficult to break or renegotiate without incurring significant financial costs. There are lease "take over" services available that may offer a less expensive solution to an early lease termination.
|Risk: Leasing allows you to switch cars every few years without taking on the risk of low resale values.
||Kilometre Limits: Lease agreements outline the maximum number of kilometres the vehicle can be driven. It will result in a penalty if over the limit. You can negotiate an additional kilometre allowance upfront before signing which may cost less than waiting until the end of the agreement.
Lower Payments: Monthly payments may be lower for lease agreements than finance agreements.
Business: You may be able to write-off costs if the vehicle is being used for business purposes (note: you would be unable to access the OMVIC Compensation Fund)
|Responsibility: You still are responsible for maintenance, repairs, licencing and insurance, despite not owning the vehicle.
Replacing your vehicle frequently: Whether you finance or lease, changing vehicles every three to five years means you are always making a monthly car payment. Over the long-term this will be more expensive than holding onto a paid-up used car.
Leaving Ontario? Most agreements require permission for extended leaves from the province.
A vehicle lease or purchase requires a great deal of research and consideration. Failing to do sufficient research before deciding to lease or purchase a vehicle can result in considerable financial implications. Remember, like any contract, consumers should always understand the terms of a lease agreement before signing it!
For more useful tips on leasing, visit OMVIC’s website or call OMVIC’s Complaints and Inquiries Team at 1-800-943-6002 x3942.
OMVIC Protects Car Buyers in Ontario
As the regulator of motor vehicle sales in Ontario, OMVIC protects consumers and maintains a fair and informed marketplace by:
- Maintaining strict registration requirements for Ontario’s dealerships and salespeople
- Regularly inspecting all Ontario dealers (new and used)
- Providing free conciliation services to consumers
- Developing/delivering consumer and dealer education/awareness programs
- Investigating and prosecuting industry non-compliance and illegal sales (curbsiding)
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